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ABC Company purchased $50484 of equipment 5 years ago. The equipment is 7-year MACRS property. The...

ABC Company purchased $50484 of equipment 5 years ago. The equipment is 7-year MACRS property. The firm is selling this equipment today for $8128. What is the After-tax Salvage Value if the tax rate is 35 percent? The MACRS allowance percentages are as follows, commencing with year one: 14.29, 24.49, 17.49, 12.49, 8.93, 8.92, 8.93, and 4.46 percent. Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

Solutions

Expert Solution

Original Equipment Price = $ 50484, Equipment Life = 7 years and Time since equipment purchase = 5 years

Depreciated Value at the end of Year 5 = Book Value at the end of Year 5 = BV5 = $ 11263

Salvage Value = $ 8128 and Tax Rate = 35 %

Therefore, After-Tax Salvage Value = Salvage Value - Tax Rate x (Salvage Value - Book Value) = 8128 - 0.35 x (8128 - 11263) = $ 9225.25

jeff jeffy answered 1 year ago
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